APTA Rail Conference - Toronto, Canada


06-04-07


Remarks
James S. Simpson, 
Administrator
Federal Transit Administration
APTA Rail Conference
June 4, 2007
Toronto, Canada

    Thank you, Steve for that kind introduction. I am pleased to be here with all of you… the leaders of the rail sector of the public transportation industry. I would like to thank APTA, and our local host, the Toronto Transit Commission.

    I am proud to be here on behalf of President George W. Bush and U.S. Secretary of Transportation, Mary Peters. Last fall, I introduced myself to the transit industry at the APTA Annual Conference in San Jose.  I expressed my belief that my experience as a business owner could add value to the FTA by focusing on the concept of “Entrepreneurial Government.”  One part of being entrepreneurial is to measure success.  Let me reiterate a key point I made at that time: Every public and private organization needs a bottom line.  For transit, the bottom line is to keep the ridership momentum growing, and to provide a continually more efficient, user friendly, reliable, productive and cost-effective operating system.

    That’s why I am happy to see the continued growth in ridership over the last several years.  The 10 billion transit rides that APTA recently reported were taken in 2006 are indicative of the value that transit produces in keeping America moving.  And rail systems played an important role in achieving this milestone.

    While the recent ridership increases are impressive, I believe we can do even more as an industry to attract new patrons.  One way to do so is to make it easier to use our systems, such as through streamlined fare collection. 
There are some great examples out there, such as the Metro Card in New York, but even these successes can be built on further.  As Joe Giglio points out in his recent book Mobility: America’s Transportation Mess and How to Fix It, long ago retailers learned that “if you can separate in the customer’s mind the act of buying from the act of paying, the customer is likely to buy more each time he’s in the store.” 

    For transit, that means making it easier to buy our service, not by collecting money each time someone rides, but having fare media that are replenished from a credit card account automatically, such as the electronic toll collection systems like Easy Pass. I’m sure that the leadership in this audience can think of other ways to take advantage of technology to make things work more smoothly for our riders, and more importantly for potential new riders who will find the added convenience a reason to switch to transit.

   Innovative ideas that increase ridership are an essential component to entrepreneurial government. However, entrepreneurial government also means being accountable. That accountability must apply to decisions made at every level of the transit industry, including FTA.  At FTA, I have made Continuous Improvement part of our culture.  That is why we recently applied to the National Institute of Standards and Technology to be considered for the prestigious Malcolm Baldridge Award, an opportunity which is only this year became available to public agencies.

   Although we only recently began on this journey to excellence, we have gained many insights into FTA and areas where we can improve. The application process is a means to an end. The end being a highly productive, customer focused Federal agency. My goal is for FTA to win the award within two years, which will be a challenge, but it is a challenge that I am confident we can meet because FTA employs some of the best and brightest.

   Just last week, we began sifting through a large number of Opportunities for Improvement—changes we can make so facets of our business can go more smoothly for ourselves, and even more importantly for you—our customers. 
 
  And later this week, the FTA leadership will be gathering to develop our Annual Performance Plan for the next year.  This is a document we produce every year to lay out:
1. what we want to accomplish,
2.  who is responsible for each action,
3. and the timeline we intend to follow. 

This year, and from hence forth, having turned the organization upside down and creating a barrierless FTA, we will focus on:
1. Execution
2. Measurement
3. Follow-up
4. Results

And let me assure you that Customer Service will be an important part of what we set out to improve.
 
 
Even before we began our efforts to apply the concept of Continuous Improvement at FTA, our staff realized that we could improve the New Starts process.  At last year’s rail conference, FTA announced that they had engaged Deloitte Consulting, an international business and management consulting firm, to provide an independent review of the New Starts program, focusing on streamlining the process while maintaining program objectives. We are now implementing most, if not all, of their recommendations. 

Their report is organized around four general themes:
• streamlining project development and evaluations processes;
• New Starts process management;
• FTA's organizational structure; and,
• improved communications.

   As I recently testified before the House Committee on Transportation and Infrastructure on New Starts with Chairman Defazio:
In order to streamline the project development and evaluation processes, we are reducing reporting requirements, and looking for ways to move projects faster and to shorten review times.  In the New Starts Guidance, which will be in the Federal Register today, we are eliminating a number of New Starts reporting requirements. 

  We are now offering grantees an opportunity to enter into a Project Development Agreement, which outlines the respective responsibilities of the grantee and FTA in the project delivery schedule. Soon, FTA will be unveiling new guidance and training for managing project development risks, such as the potential for cost overruns and schedule delays.   

  To improve New Starts process management, we are working on developing and better integrating program performance measures into our strategic business plan.  We have already taken many steps to improve our industry guidance documents. In addition to the project risk management guidance about to be issued, we are developing guidance that will capture previously immeasurable benefits in local travel forecasting procedures. We also intend to clarify and simplify procedural requirements for advancing projects through the New Starts development process. 

   To further improve the New Starts management process, we are exploring a more efficient and transparent tracking and data collection system to facilitate project development delivery reviews.

   To clarify FTA's organizational structure, we are doing more to optimize employee skills in program administration and stakeholder service.  For example, FTA is implementing "New Starts Teams" consisting of Regional and Headquarters staff who will deliver program and technical assistance to bring a "problem-solving" attitude to each project.

   To improve communications with our stakeholders, the New Starts process must be as transparent as possible, facilitated by a productive working relationship.

   I echoed that very sentiment last year at my Senate confirmation hearing when I pledged to make FTA more transparent and to keep Congress better informed.  To better serve individual project sponsors, we will be offering additional outreach to the public transportation industry.  I also pledge to you that we will be making our decisions about New Starts projects more clearly and promptly. 
   I think you will agree that FTA is committed to the New Starts program.  In less than a year, we have executed 5 Full Funding Grant Agreements worth $3.42 billion in New Starts funding, with total project costs of approximately $10 billion.  In July of this year, we intend to execute another FFGA with the Tri-Met  for the Portland, Oregon, Downtown Mall Light Rail project, which by one count will be our 100th FFGA.

   Over the years, FTA has made good investment choices for Federal New Starts dollars due, in part, to our increased commitment to sound management practices.  FTA's current portfolio (i.e., the number of projects in the construction phase, totals $21.5 billion) and we are managing costs to within a half percent of the FFGA baseline and cost estimates.  Based on my experience, in both the public and private sectors, that is unheard of.

   Further, in Bent Flyvbjerg’s book, Mega Projects and Risk, the difference between actual and estimated investment cost is often 50 – 100 percent; and for many projects, cost overruns end up threatening project viability. “A first step in reducing costs overruns is to acknowledge that a substantial risk for overrun exists and cannot be completely eliminated; but can be moderated.”
FTA has been at the forefront of managing mega project risks. Accurate forecasts of the cost and ridership of proposed New Starts projects are crucial to the continued credibility of the New Starts program.  New Starts is a program lauded by the GAO, OIG, Congress, and others.  To keep it that way, we must continue producing high quality projects that provide mobility, environmental benefits and deliver what they promise to the taxpayers.

   We are working hard to pay special attention during the planning process to ensure that transit agencies – and the contractors that work for them – produce objective data because that data becomes the basis for local decision making.  Often it has been the case that the costs and ridership projections for New Starts projects at the end of Alternatives Analysis are dramatically rosier than those made later in the process. 

  In order to protect the integrity of the decision making process – at the crucial stage where local decision makers are selecting a preferred alternative and dismissing others – we need to do better of producing accurate forecasts. 

  Two things are taking place that are very positive.  First, cost and ridership projections at the FFGA entry ARE being achieved once revenue operations commence.  The fact that our portfolio of projects is coming in at no more than 0.5 percent above the FFGA estimates is clear evidence of this.  Second, when comparing cost estimates for New Starts projects made at the end of Alternatives Analysis to actual construction costs, we are finding a much higher degree of accuracy than in the past. 

  The Congress has challenged FTA and the industry to get the numbers right by including several incentives in the most recently enacted authorizing legislation.

  For example, grantees are now able to retain the savings realized for those projects brought in under budget.  By providing an incentive to the transit agency by allowing them to keep the savings, we believe that there will be increased effort to contain costs.
Also, the legislation gives the Secretary of Transportation the authority to increase the federal share for a new starts project that comes within 10% of the cost and ridership forecasts made at the end of Alternatives Analysis.  This incentive is targeted explicitly to ensure the validity of forecasts used when the locally preferred alternative is being selected.

  Finally, the FTA is implementing a requirement to produce a Contractor Performance Assessment Report.  As I said in San Jose last fall, “We need to think of business NOT as usual.” Consider this the “Consumer Reports” of travel demand and cost estimation.  For the first time, grantees will be able to consult a document that qualifies the contracting firms’ performance. 

   By knowing which contractors are producing the most accurate forecasts, a grantee will be able to better position itself to attain eligibility for the incentives I mentioned earlier.

   Similarly, for those of you in the business of estimating costs and ridership, this is an opportunity to showcase your skill and qualifications, thereby growing your business and the professional reputation of your company.  Just like with Consumer Reports, the savvy customer will be drawn to the highest performing supplier.   We believe that this has the potential to revolutionize the industry and continue to improve upon the great reputation that the New Starts Program enjoys.

  SAFETEA-LU established the Small Starts program to advance smaller fixed guideway and non-fixed guideway projects, such as bus rapid transit, streetcars, and commuter rail projects. As of last November, when we were preparing the Fiscal Year 2008 budget, twelve sponsors applied for the Small Starts program.  FTA found that four of these projects were ready to advance and we recommended them for funding in FY 2008. In fact, we recently announced funding for three of these projects using discretionary funding in FY 2007. 
 
 
In early 2006, FTA issued an Advance Notice of Proposed Rulemaking on the Small Starts program and draft policy guidance on the New Starts program.  Both these programs involve complex issues and the comments we received in response to our proposals were extensive.  FTA has reviewed and reconciled the comments, and we hope to soon issue an NPRM for both the New Starts and Small Starts programs.

  Let me assure you that the time we are taking to get the New Starts regulation right is NOT delaying the process.  In the interim, FTA has issued New Starts Policy Guidance and Interim Guidance on the Small Starts program to aid the development and advancement of projects. 

  As I noted before, we recently issued additional Policy Guidance that implemented some of the streamlining recommendations made in our New Starts Program Review.   A final rule on New Starts and Small Starts is expected to be issued sometime in 2008.
As many of you know, USDOT has made congestion relief our top priority and with good reason.  Frequently, our transportation infrastructure is not meeting the needs of commuters, travelers, and businesses. The tab for congestion in wasted fuel and squandered time amounts to an estimated $200 billion a year.  The Bush Administration and the Department of Transportation refuse to accept congestion as a fact of life.

   An expanded public transit system can help mitigate highway congestion, lower travel time and increase productivity and profitability for our nation’s businesses and individuals alike.  We need to begin thinking now… about how congestion mitigation strategies will impact public transportation… as well as about how public transportation can mitigate congestion.

   The book, The City Beneath Us, Building the New York City Subway System, written by the New York Transit Museum notes that in the years right after World War I, the price of consumer goods went up 56 percent, but the subway fare was still a nickel.  The cost of building a subway car was twice what it had been in 1914.  Steel was hard to come by, and the cost of labor had gone up.  Sound familiar?
 
  The authors continue, “The workforce that gathered in the skyscrapers of Manhattan was one of the most dynamic the world had ever seen.  Without the subway, this concentration of talent could never have been achieved.  However, everyone knew the subway needed more money, but no one wanted it to come out of their pockets.”
 
  The more things change, the more they stay the same.  We are facing some of the same challenges today.  The gas tax, which has for 50 years fueled our transportation financing policy at the Federal level, is no longer sufficient to keep the Highway Trust Fund solvent for more than a year or two more. 
 
  We are going to need to look at a wide range of innovative financing methods to find a path ahead.  This can include:
1. increasing the role of the private sector in transit operations and finance,
2.  using new financing techniques to leverage existing resources or attract new ones,
3.  and increasing ridership revenue.  

Many of these ideas are well known to you already:
• Joint Development,
• Design-Build and other more elaborate Public Private Partnerships,
• State Infrastructure Banks,
• and as I mentioned earlier, use of technology to collect fares more creatively and market based.  

Let me say that the door at FTA is always open to new ideas in innovative finance.

  Maybe one way to find a way forward is to look a little further ahead.  Zachary Schrag, author of ¬The Great Society Subway: A History of the Washington Metro, stated that “thinking big has long been out of fashion in transportation. Economists repeatedly have warned against rail plans that promise low cost and high patronage.”  
 
  Schrag points out that the BIG  PLAN that Metro represented in the 1960’s helped cement a regional consensus for transit, and assured the success of transit-oriented development on a large scale, making Metro vital to the Washington region. 
He states “In building Metro, Washingtonians did not seek the cheapest transportation system, but one best suited for the kind city they wanted for themselves and their children.” Secretary Peters recently echoed a similar philosophy when she stated “We need to think boldly.”

  As I have said at previous APTA conferences, we have one shot at building these projects; so we need to build them right and we need to build them to last. Perhaps by thinking big again, we can develop the kind of national consensus we need to assure that we get the kind of cities, and nation, that we want, and find the resources to pay for them.
 
   I say, when you look at all the benefits transit provides, “transit does not cost, it pays!”

According to Secretary Peters, we need 21st Century solutions to our transportation challenges.  I am confident that working together, we can find these solutions and keep America moving.

Thank you.